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2017 Archives -

2017 A Banner Year! Where to from Here?

By | 2018, Money Moxie | No Comments

For answers about the 2018 stock market (S&P 500) we turn to Ed Hyman, Founder, Chairman, Head of Economic Research at Evercore, ISI, a top-ranked macro and investment firm. Hyman was voted #1 Wall Street Economist by Institutional Investor’s survey of professional investors for an incredible 37 years. His comprehensive, but succinct and easily digestible daily macro research is considered a must-read by professional investors.

To understand where we are growing, it helps to understand where we have been. A central thesis of Hyman’s is that the stock market drives economic activity. Since 1968–that’s a 50-year stretch–the S&P 500 has increased 20 percent or more only 12 times. Last year (2017) it came within a hair of doing so with its 19.4 percent gain.

In 10 of those 12 times, the economy was strong the following year. Taking out the effects of inflation, real GDP increased 2.7 percent or more. So 83 percent of the time economic activity was robust. The average for the 12 years after market advances of 20 percent or more was 3.4 percent real GDP growth.

The S&P 500 last year had another distinction. According to Hyman’s team, 2017 was the first year ever that the S&P 500 posted positive total returns–that’s including dividends–every month. The previous closest perfect year was 1995, which had only one down month. The market that year (1995) was up 34 percent. The following year (1996) it gained 23 percent, dividends included, and real GDP was a gang buster 4.5 percent.

Bullish Best Wishes in 2018,

Roger M. Smedley, CFP®
CEO

The S&P 500 is widely considered to represent the U.S. stock market. One cannot invest directly in an index. Investing involves risk, including potential loss of principal. Past performance does not guarantee future results. The opinions and forecasts expressed are those of
the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not
a recommendation to purchase any type of investment.

Source: WealthTrack, Episode #1429, Broadcast January 5, 2018

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2017 Predictions

By | 2017, Money Moxie, Newsletter | No Comments

Market movement since Election Day has been massive and investors see this as confirmation of just how good Republicans are going to be for the economy. How could so many investors be wrong? Actually, fairly easily.

Right or wrong, investors should be careful not to get carried away. There is a high amount of uncertainty and no way to know what the future will bring.

(1) Trump Rally
The big move in stocks in November and December has been an acceleration of the positive momentum already taking place in the economy. It has been characteristic of many presidential election years with a good economy.

It is completely normal to get excited, but don’t let it lead to overconfidence. Few things last forever and most years have their ups and downs.

It is not unusual to see inauguration day (Friday, January 20, 2017) mark a change for investors as they realize the new president does not have a magic wand.

(2) Dow 20K
The Dow stock index has been flirting with 20,000. It just could not quite get there in 2016. In 2017, I believe it will! And it will likely cross that mark many times.

The first time the Dow reached 10,000 came in March of 1999. Over the next 11 years, it crossed that level on 34 days until it surpassed it a final time in the summer of 2010.

It’s hard to fight gravity and it’s hard to turn a large ship. There is so much positive momentum right now that I expect it to continue. Unemployment is falling. Wages are rising. Confidence is climbing.

One unknown is the impact of policy changes on global trade, which may decline this year as the United States turns its focus inward.

(3) Fed Does Its Job
The Federal Reserve is likely to “take away the punch bowl just as the party is getting started.”

For two consecutive years I have accurately predicted that the Fed would be more cautious than its own forecast. This year, I am accepting the Fed’s forecast that it will raise rates 3 times in 2017.

Of course, no one knows with certainty because with each rate hike, I expect investors will become more concerned.

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